Daily Morning Report

Wednesday, May 22–Jim Wyckoff’s Morning Markets Report

World stock markets were mixed overnight. U.S. stock indexes are also pointed toward narrowly mixed openings when the New York day session begins. Risk appetite among traders and investors is a bit keener this week, as the U.S.-China trade war rhetoric from both sides has died down the past few days.

In overnight news, St. Louis Federal Reserve Bank President James Bullard said in a speech in Hong Kong late Wednesday that the U.S. central bank may need to lower interest rates if inflation levels continue at very low levels. The Federal Reserve would like to see annual U.S. inflation around the 2% level. Bullard is a voting member of the Federal Open Market Committee (FOMC).

In another sign of worldwide inflation that is very low, or even problematic, Germany’s government auctioned 10-year bonds (bunds) for an average yield of -0.07%. That’s the lowest yield in almost three years.

The key “outside markets” today see the U.S. dollar index slightly down but still not far below this year’s high, which is a two-year high. Meantime, Nymex crude oil prices are also weaker and trading around $62.50 a barrel.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the FOMC minutes and the weekly DOE liquid energy stocks report. U.S. Treasury Secretary Steven Mnuchin also speaks to a U.S. House committee today.

–Jim

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Tuesday, May 21–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly higher overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins.

The Paris-based OECD think tank today reported that trade disputes between the U.S. and its trading partners have weakened global business investment. The OECD said business investment in 2019 will increase by 1.75% compared to a growth rate of 3.5% in both 2017 and 2018.

In other overnight news, Australia’s central bank says it will consider lowering interest rates at its early-June meeting. Australia’s economy and its currency have been ailing in recent months, due in part to the U.S.-China trade dispute.

The key “outside markets” today see the U.S. dollar index firmer and not far below this year’s high, which is a two-year high. Meantime, Nymex crude oil prices are also up and trading around $63.50 a barrel.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and existing home sales.

–Jim

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The U.S. stock index futures hit contract and/or multi-month highs in early May but have since appeared to “roll over” as the bulls have lost power. The “sell in May and go away” trading adage appears to be holding true as we have passed the mid-point of May. See on the daily bar chart for the June e-mini S&P futures that prices have dropped from the recent high. Note at the bottom of the chart that the Moving Average Convergence Divergence (MACD) indicator is in a bearish posture as the blue trigger line is below the red MACD line and both are trending lower. A drop in price below the solid support line seen on the chart would give the U.S. stock index bears fresh power to suggest a new leg down in prices. Stay tuned!

Monday, May 20–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. The U.S.-China trade war drags on, with any agreement between the two largest economies in the world not seen imminent. This matter will likely continue to be a drag on world stock markets until it’s come to a successful conclusion.

Markets are not reacting much to a threatening tweet President Trump made to Iran over the weekend. Trump warned Iran not to threaten the U.S. or it could mean an end to Iran as a country. A U.S. naval task force has been deployed to the Persian Gulf recently.

In overnight news, the German Bundesbank reported it expects Germany’s economy to stagnate in the second quarter of this year. Germany’s economy is the workhorse of the European Union.

In other news, Australia’s conservative government got a surprising victory in weekend national elections. And India’s Prime Minister Modi has likely won re-election over the weekend, according to exit polls.

The key “outside markets” today see the U.S. dollar index near steady. Meantime, Nymex crude oil prices are also trading around unchanged and just below $63.00 a barrel.

U.S. economic data due for release Monday is light and includes the Chicago Fed national activity index.

–Jim

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Friday, May 17–Jim Wyckoff’s Morning Markets Report

World stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. News reports out of China late Thursday painted a bleaker picture of the U.S.-China trade discussions, including questioning whether any further talks are scheduled between the world’s two largest economies. This has helped to pressure world stock markets to end the trading week. Also, the U.S. stock indexes have had a very good week after Monday’s sell off. It could be that traders are booking some profits heading into the weekend.

The Chinese yuan continued to depreciate against the U.S. dollar Friday, due to the U.S.-China trade war. European traders are a bit unsettled and the British pound has sold off this week on news that British Prime Minister Theresa May will resign. That’s creating more uncertainty on the Brexit matter. And the Australian dollar continues to wilt against the greenback, with the Aussie hitting lows not seen in around 10 years.

In other overnight news, the Euro zone reported its April consumer price index at up 0.7% from March and up 1.7%, year-on-year. Those numbers were right in line with market expectations.

Simmering on the back burner of the world marketplace this week is rising U.S.-Iran tensions. The U.S. has sent a naval task force to the Persian Gulf and there is talk that President Trump may send thousands more troops to the region. It’s very likely this situation will intensify before it fully plays out.

The key “outside markets” today see the U.S. dollar index slightly higher, while Nymex crude oil prices are also up and trading around $63.50 a barrel.

U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey and leading economic indicators.

–Jim

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Grain futures prices have made strong rebounds this week, on heavy short covering from the large speculators (funds) and also some bargain hunting. This week’s price action suggests market bottoms are in place and that prices could start to trend up. Weekly closes on Friday that are at or near the weekly highs would be a better clue price uptrends can be sustained. It appears grain traders have factored into prices all the bearish U.S.-China trade news, and are now focused on wet weather in the Corn Belt (and more on the way) that has seriously slowed corn and soybean planting progress—to the point that yields will be impacted negatively. Remember, we are at the beginning of “weather market” season in the grains. If you’d like to read an interesting story on weather markets in the grains, just send me an email at jim@jimwyckoff.com and I’ll attach it and send it back to you. Stay tuned!